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There are numerous reasons
why holding your shares in a nominee service is a bad idea (see
Nominee_Accounts if you do not understand
why). As a result many
UKSA members are either Personal Crest Members or hold Share Certificates.
However following proposals from the European Securities Forum, proposals
were incorporated into the new
Company Law Reform Bill when this was introduced into Parliament in 2005, but these
proposals were quite inadequate in the views of UKSA.
See the following press release we issued on this subject at:
UKSA_Press024_Company_Law_Reform and more background information at:
Shareholder_Enfranchisement_Background.
A previous comment on this
subject was also made in an open letter to Minister Jacqui Smith at:
Dematerialisation_&_Nominees_Letter_Jacqui_Smith which is also
summarised in the following press release:
UKSA_Press019_Dematerialisation - these also covered the issue of
"dematerialisation", ie. the replacement of paper share certificates by an
electronic transfer system.
 However
in early July 2006, the Government
implemented an Amendment to the
Company Law Reform Bill (subsequently renamed the Companies Act) which ensured rights for shareholders in nominee
accounts. This extends to more than just rights to information, as
originally proposed, but only covers listed companies (that
at least means shareholders in ISAs and PEPs get full rights as only fully
listed companies can be held within them). This
followed a long campaign by UKSA and other parties, including success with a
Lord's Amendment which was vigorously opposed by some registrars and company
secretaries. UKSA members took part in a public demonstration outside
Parliament in July 2006 to ensure recognition of this issue (photo left).
But one problem with the
new Act is that it is optional for stockbrokers to implement enfranchisement
for their clients, i.e. for the beneficial shareholders. To encourage them
to do so UKSA publishes a list of stockbrokers who do offer information and
voting rights to their clients which can be seen on this page:
Recommended_Stockbrokers.
More explanation to our members on
the future of share
certificates was given in:
Scrapping_Share_Certificates and
ICSA launched a
consultation document in April 2006 on "Electronic Share Trading" that is
intended to replace the issue of paper share certificates and the associated
processing procedures. It is suggested that the new system will reduce
costs, expedite settlement, improve security and generally enable the UK
stock market to keep ahead of international trends. UKSA was closely
involved in the development of these proposals and recommends that all
private shareholders should study and comment on these plans. The full
consultation document can be downloaded from:
www.icsa.org.uk/demat/ or you
can complete the survey questions on-line if preferred.
The problems of nominee
accounts are also outlined in an article
by Paul Killick at:
Beneficial_Shareholders,
and is spelled
out more fully in the following article that appeared in Update in 2002:
Nominee_Service_Versus_Certificates, or go to an article from 1997:
Nominee_Accounts.
Keeping shares as
paper certificates creates security issues and problems with settlement now
that settlement times have been reduced. So you should also
consider Sponsored Crest Membership (i.e. personal membership of the Crest
service) as a third option. It ensures timely settlement, simplified
dealing, reliable payment of dividends and a guarantee of receiving notice
of all corporate information and company meetings. Go to
www.crestco.co.uk for more information.
Note that legally your
possession of a share certificate is not the key evidence of whether you are
a member of the company. This depends primarily on whether you have been
entered in the register of shareholders (the "share register"). An
electronic or "dematerialised" share registration is therefore no practical
bar. A good background note on the subject of shareholdings is given at
Information_Sheet_Shareholdings.
For other submissions by UKSA
on the issues of replacing share certificates by electronic registrations
(ie. "dematerialisation") and the problem of shortening settlement times, go
to:
Share_Certificates_and_Dematerialisation_APCIMS_2001
Share_Certificates_and_Dematerialisation_CREST_2001
Crest_Settlement_1999
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